Nicolas Birkhäuser (Niederer Kraft Frey) authored this publication.

Apart from limited sector-specific regulations, there is currently no general FDI regime in Switzerland. A draft FDI Act is currently being debated in the Swiss parliament. The final version of the FDI Act is expected to come into force in 2026 at the earliest.

Summary of major changes in 2024

• The National Council, the first chamber of the Swiss parliament, debated the future FDI Act in its session on September 17, 2024.
• Among the issues under debate was extension of scope. Contrary to the Federal Council's proposal, the future FDI Act should apply not only to state-controlled investors but to all foreign investors.
• In addition to public order and security, the supply of essential goods and services was included as a protected interest.
• The National Council granted the Federal Council more discretion to subject additional companies to the approval requirement if needed.
• The decisions of the National Council go significantly beyond the Federal Council's original proposal, which envisaged a rather restrained FDI regime by international standards.
• The deliberation regarding the future FDI Act in the Council of States, the second chamber of the Swiss Parliament, is scheduled for the spring session of 2025.
• It is important to note that this legislation is still in the process of being debated and has not yet been finalized. The final version of the future FDI Act is expected to come into force in 2026 at the earliest.

Who files?

While there is currently no general FDI regime in Switzerland, under the sector-specific regulations no specific types of foreign investors are covered. In particular, there is currently no specific legislation covering state-owned entities and sovereign wealth funds.

In certain business sectors, government licensing conditions include specific requirements regarding foreign investors, while the licensing conditions in other business sectors do not specifically differentiate between foreign and domestic applicants and investors.

In the case of banks and securities dealers, "foreigners" are covered. With respect to real estate in particular, foreign individuals or companies, and Swiss nationals buying real estate as a proxy of foreigners, are covered by the legislation.

Types of deals reviewed

While there is currently no general FDI regime in Switzerland, sector-specific regulations relevant to foreign investors apply in numerous sectors and industries.

Business sectors with specific licensing requirements for foreign investors include: banks and securities dealers; real estate; radio and television; telecommunications; nuclear energy; and aviation.

Business sectors subject to licensing without explicit licensing requirements for foreign investors include: financial industry and insurance (other than banks and securities dealers); casinos and gambling; defense; postal services; commercial shipping vessels; power and gas installations; and railways.

In addition, a number of companies that provide key critical infrastructure are owned or controlled by federal, cantonal or local agencies. The agencies may exercise a de facto foreign and domestic investment control with respect to these companies.

Scope of the review

As there is currently no general FDI regime in Switzerland, the scope of application of the FDI regime currently depends on the specific industry or sector, and the respective laws and regulations of that sector have to be considered.

The Federal Council presented a draft of the future FDI Act in December 2023. According to this draft, investment screening will focus on state-controlled investors and domestic companies operating in particularly critical sectors. The Swiss parliament is currently debating whether the Act should apply not only to state-controlled investors but to all foreign investors.

According to the draft FDI Act, the domestic companies operating in particularly critical sectors are divided into two categories with different thresholds.

Sectors traditionally deemed relevant for national security include the manufacture of armaments or dual-use goods, the operation of energy infrastructure or water supply, as well as security-related IT services. Acquisitions of such domestic companies with more than a certain number of full-time employees worldwide or a worldwide annual turnover exceeding a relatively low threshold would need to be approved.

Sectors in which risks to public order or security cannot be completely ruled out include: university hospitals; companies involved in the research, development, production and distribution of medicines, medical products or vaccines; as well as centralized transport, distribution, telecommunications or financial market infrastructures. Acquisitions of these domestic companies with a turnover exceeding a higher threshold would need to be approved.

An acquisition would be approved if there is no reason to assume that public order or security is jeopardized. According to the current debate in parliament, in addition to public order and security, the supply of essential goods and services was included as a protected interest.

Review process timeline

As there is currently no general FDI regime in Switzerland, there is no standard notification proceeding, and the applicable laws generally do not foresee specific approval or waiting periods. The timeframe for review depends on the sector-specific regulation in question.

Under the current rules, for banks and securities dealers, a license may generally be obtained within roughly six months.

With respect to real estate (Lex Koller), the timing depends in particular on the location of the real estate in Switzerland and the complexity of the case.

The timing required for obtaining licenses in other business sectors significantly depends on the complexity and individual factors of the case. Careful planning and a strategic approach are therefore essential for successfully obtaining required approvals in time.

Under the current proposals in the draft FDI Act, the competent authority would be the State Secretariat for Economic Affairs (SECO). Approval could also be subject to conditions. The SECO would have to decide within one month whether an acquisition can be directly approved or whether to initiate a three-month review procedure. If no decision is taken within these deadlines and the deadlines are not extended, the acquisition would be deemed to have been approved.

How foreign investors can protect themselves

The rules outlined above must be applied. In addition, as a general rule, early information of, and pre-notification contacts and discussions with, the competent authority are usually welcome and helpful in Switzerland. This can vary depending on the specific sector in question.

Should a decision of a Swiss authority not meet the interests of an undertaking, as there is currently no general FDI regime in Switzerland, there is no standard appeal proceeding and no single competent appeal authority. Negative decisions by Swiss authorities can be challenged or appealed as a general principle of Swiss law. Depending on the specific sector in question and on the remedy or appeal taken, the relevant procedure may be administrative or judicial in nature. A judicial appeal to a court will, in any event, be possible.

In case of banks and securities dealers, decisions by the Financial Market Supervisory Authority can generally be appealed to the Federal Administrative Court. A further appeal against the Federal Administrative Court's decision can be made to the Federal Supreme Court.

With respect to real estate, decisions of the cantonal approval authority can be appealed to cantonal appeal bodies. A further appeal against the ultimate cantonal appeal body's decision can be made to the Federal Supreme Court.

Under the future FDI Act, appeal proceedings will be possible.

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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